Thursday , 17 August 2017


Grantham's Advice: Allocate 30% to Resources (15% in Forestry, 5% in Efficiency Investments, 10% in “Stuff in the Ground”) – Here's Why

The biggest danger to our society will be food prices and food costs…. Productivity of grains has fallen to 1.2% per year which matches population growth exactly leaving society with no safety margin. [In addition,] there is a coming shortage of two fertilizers which occur exclusively in nature…so once the supply is gone, it’s gone forever – and this can only mean that commodity prices are going higher – much higher. Words: 585

So reports Jason Cimpl (www.wyattresearch.com) in edited excerpts from his original article* entitled Legendary Investor Warns of No Safety Margin from This Collapse.

Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), may have edited the article below to some degree for length and clarity – see Editor’s Note at the bottom of the page for details. This paragraph must be included in any article re-posting to avoid copyright infringement.

Cimpl goes on to convey, in part:

Forbes recently caught up with the famed investor, Jeremy Grantham, and apparently, the first words out of his mouth were, “I think next year will be a dangerous year.” Grantham listed a few of the worries he has heading into 2013.
  1. China will continue to slow next year.
  2. The U.S. fiscal cliff…
  3. The U.S. GDP will slow more than expected as Europe and China begin to contract.
  4. [Stock] returns during the first year of the presidential term are often low as the Fed and government often try to get things in order….Grantham elaborates, “History is quite clear. There has been, on average, no money made in year one and two after a Presidential election going back to 1932, after you adjust for inflation. All the money is made in year three with an adequate return in year four.” His explanation for the gains in the last two years is that year three will typically offer stimulus and year four is the beneficiary of loose policy during year three….
  5. The Fed may surprise investors with an interest rate increase because, when everyone passionately believes in a single outcome (i.e. that interest rates will be low for many years), an opposite result tends to unfold.

6. The one thing he fears more than all the above combined, however, is commodity scarcity.

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The prices of raw materials are accelerating higher. Nearly every commodity has tripled in value since 2002. Though the ascent has been parabolic, Grantham doesn’t believe it’s a bubble … and that’s what worries him. He believes that commodity prices are going higher because we’re running out.

Grantham claims the biggest danger to our society will be food prices and food costs. He also noted that growth in the productivity of grains has fallen to 1.2% per year. This rate exactly matches population growth, leaving society with no safety margin.

However, the rise in food costs and decline in crop growth isn’t Grantham’s biggest long-term worry. Grantham is distressed most about a coming shortage of two fertilizers:

  1. phosphorus and
  2. potassium.

Fertilizer supplies are dwindling rapidly – and farmers are more reliant than ever on fertilizer to replenish crop soil – and potassium and phosphorus are necessary to grow crops and livestock.

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Moreover, phosphorus and potassium occur exclusively in nature. We cannot manufacture them. Once the supply is gone, it’s gone forever. It’s clear we need these commodities in order to survive and we appear to have no replacements. Despite Grantham’s more than $99 billion in assets, he can’t get an answer from anyone about what happens when we run out. He claims to have received only one conclusion – if we don’t reduce our usage over the next 20 to 40 years, we’ll starve.

Grantham’s views are nothing new, though, as he has been concerned about food scarcity for years, so it’s logical that he’s bullish on investments in natural resources. He advises targeting a 30% allocation to resources, with 15% in forestry, 5% in efficiency investments and 10% in “stuff in the ground.”

*http://www.wyattresearch.com/article/legendary-investor-warns-of-no-safety-margin-from-this-collapse/29000

Editor’s Note: The above post may have been edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.

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